Real Estate and REITs
Published by Radif Partners · Updated
Global property, European REITs, real estate without buying property
This page compares 22 funds in the Real Estate and REITs category, with ongoing charges from 0.07% to 0.60% and a median of 0.29%. The gap between the cheapest and the dearest is worth roughly €530 over ten years on €10,000 invested: for a comparable index, that is the most reliable difference between two funds, because it rests on no assumption about markets. 4 of the 22 funds are accumulating and 22 replicate their index by holding its securities, the others using a swap. The largest fund in the list is VNQ, which matters less for returns than for the risk of closure: a fund that stays small usually ends up merged. Past performance is not used to rank this list: over the horizons published it says more about the index being tracked than about how the fund is run.
22
0.30%
-3.9%
0.07%
+33.9%
Vanguard Real Estate ETF
Schwab US REIT ETF
Real Estate Select Sector SPDR Fund
iShares Global REIT ETF
iShares Core U.S. REIT ETF
iShares US Real Estate ETF
Vanguard Global ex-US Real Estate ETF
iShares Developed Markets Property Yield UCITS ETF USD (Dist)
iShares US Home Construction ETF
SPDR Dow Jones REIT ETF
SPDR S&P Homebuilders ETF
Xtrackers FTSE EPRA/NAREIT Developed Europe UCITS ETF 1C
JPMorgan BetaBuilders MSCI US REIT ETF
iShares European Property Yield UCITS ETF EUR (Dist)
iShares Developed Markets Property Yield UCITS ETF USD (Acc)
Xtrackers MSCI World Real Estate UCITS ETF 1C
iShares Mortgage Real Estate ETF
VanEck Global Real Estate UCITS ETF
VanEck Mortgage REIT Income ETF
Xtrackers MSCI World Real Estate UCITS ETF 1C
Pacer Industrial Real Estate ETF
Amundi FTSE EPRA Europe Real Estate UCITS ETF Dist
A listed property company is not bricks, it is a rate-sensitive equity
Listed property funds hold property companies, SIICs in Europe and REITs in the United States, which enjoy a specific tax regime: they pay no corporation tax provided they distribute nearly all their rental income. Hence high yields, often four to six per cent, and a tax treatment for the holder that follows ordinary dividends. But their share price does not track building values day to day: it tracks interest rates, because a property company carries debt and because its yield is compared with a bond's.
That explains the gap that surprises investors: in 2022 listed property fell close to thirty per cent while building values, revalued once or twice a year by surveyors, barely moved. The listed market anticipates, the valuation records. Two checks then matter: the asset type, since offices, retail, logistics, residential and data centres now follow sharply divergent paths, and the level of debt, since a heavily indebted company with borrowings to refinance soon is a bet on rates more than on property.
What the funds in this category show
Where the money actually sits
The category holds 22 funds and 115.9B in combined assets, and those assets are not spread evenly. Vanguard Real Estate ETF (VNQ), run by Vanguard, holds 66.4B on its own, and the three largest, Vanguard Real Estate ETF (VNQ), Schwab US REIT ETF (SCHH) and Real Estate Select Sector SPDR Fund (XLRE), account for 73.0 % of the total. At the other end, Amundi FTSE EPRA Europe Real Estate UCITS ETF Dist (EPRA) manages only 92M. Size is no guarantee of quality, but it decides two very concrete things: the spread between buying and selling price you pay on every order, and the odds that the fund still exists in ten years.
The fee gap, in money
Ongoing charges run from 0.07 % for Schwab US REIT ETF (SCHH) to 0.60 % for Pacer Industrial Real Estate ETF (INDS), a gap of 0.53 points, against a category average of 0.30 %. On £10,000 held for ten years that gap is roughly 530 in extra charges, before counting the return that money would itself have earned. It is the one variable in the comparison known in advance: past performance does not repeat, fees repeat every year.
Two funds in one category do not hold the same basket
The 22 funds listed track 19 different indices, among them MSCI US Investable Market Real Estate 25/50, Dow Jones Equity All REIT Capped, Real Estate Select Sector and FTSE EPRA Nareit Global REITs Net Total Return. The largest tracks MSCI US Investable Market Real Estate 25/50. That spread is why two funds filed under the same theme can differ by several points over a year: they hold different securities, weight them differently and rebalance on different dates. Each fund page names its index, and that is where a serious comparison starts.
Replication and domicile
All 22 funds in the category replicate their index physically: they hold the securities. What remains to check is whether the fund lends those securities, which the key information document states, and how much: lending income lowers the real cost, counterparty risk adds to market risk.
14 of the 22 funds are domiciled in US, the rest in IE, LU and NL. Domicile sets the withholding tax the fund itself suffers on the dividends it receives, a cost absent from the stated fee but present in the return, and it also sets your own tax treatment depending on where you live.
Accumulate or take the income
4 funds accumulate dividends, 18 pay them out. The largest accumulating share class is Xtrackers FTSE EPRA/NAREIT Developed Europe UCITS ETF 1C (XRET), the largest distributing one Vanguard Real Estate ETF (VNQ). The choice is not about yield, both versions of the same index return the same before tax, but about tax and discipline: the accumulating class reinvests with no cost and no decision, the distributing class pays income that is taxable in the year it arrives.
Age and critical size
The oldest fund in the category, iShares US Real Estate ETF (IYR), launched on 2000-06-12, giving 26 years of history, and the newest, iShares Developed Markets Property Yield UCITS ETF USD (Acc) (DPYA), on 2019-04-26. A long record shows how the fund behaved in a fall, which no one-year number can. A fund launched two years ago has lived through a single market regime.
1 of the 22 funds manage under 100 million, among them Amundi FTSE EPRA Europe Real Estate UCITS ETF Dist (EPRA). Below that level a fund rarely pays for its issuer, and a closure forces a sale on the issuer's timetable rather than yours, with capital gains tax along the way.
Frequently asked questions
What are REIT ETFs?
REIT (Real Estate Investment Trust) ETFs invest in companies that own, operate, or finance income-producing real estate. They provide exposure to property markets without buying physical real estate. Check the figure in the key information document of the exact share class your broker offers, since two classes of the same fund can differ on charges and on distribution policy.
Do REIT ETFs pay good dividends?
REITs are required to distribute most of their income as dividends. REIT ETFs typically yield 3-5%, making them attractive for income investors. However, yields vary by property type and interest rate environment. What matters more than the ranking is whether the underlying index suits your horizon and your tolerance for a fall of thirty per cent, which no score can decide for you.
How do interest rates affect REIT ETFs?
Rising interest rates increase borrowing costs for REITs and make bond yields more competitive, often causing REIT prices to fall. Falling rates generally benefit REITs. Past performance over these horizons says more about the index than about the fund, which is why the comparison here weighs cost, size and tracking quality instead.
What types of real estate are in REIT ETFs?
Modern REIT ETFs include industrial warehouses, data centers, cell towers, healthcare facilities, residential apartments, and retail properties. Data center and industrial REITs have been the strongest performers recently. Over a ten-year horizon the ongoing charge weighs more than any difference in past performance: 0.20% against 0.50% on €10,000 is about €300, compounded.